MARKET SNAPSHOT: U.S. Stocks Brace For More Earnings

By Nick Godt

With mixed reports from bellwethers denting enthusiasm for the rally in stocks, investors await one of the busiest weeks of the third-quarter earnings season hoping that key results will not only top estimates, but show improving sales, and provide upbeat outlooks.

With just 61 S&P 500 companies having reported earnings so far, 79% have topped analysts' expectations, 11% have matched, and 10% have come in below expectations, according to Thomson Reuters.

And third-quarter S&P 500 earnings are now expected to be down 22.6% year on year, a slight improvement from expectations of a 24.6% last week, thanks to upbeat results from JP Morgan Chase (JPM), Citigroup (C) and Goldman Sachs (GS).

But after a good start to the week, the market took a hit Friday after results from Bank of America (BAC), IBM (IBM) and General Electric Co. (GE) disappointed investors.

"When you're in a market that has had a nearly 60% upward move, everything has to go right," said Hugh Johnson, chairman of Johnson Illington advisors. "To me, GE was especially disappointing on its sales as its results still reflect global economic conditions to a large degree."

On Friday, the Dow Jones Industrial Average (DJI) fell 67 points, or 0.7%, to 9,995, weighed down by drops of more than 4% in shares of Bank of America, IBM and GE.

The Dow traded above the 10,000 mark on Wednesday for the first time since October 2008.

The S&P 500 index (SPX) slipped 8 points, or 0.8%, to 1,087, and the Nasdaq Composite (RIXF) lost 16 points, or 0.8%, to 2,156.

For the week, the Dow still rose 1.3%, the S&P 500 gained 1.5%, and the Nasdaq rose 0.8%.

"Earnings need to come in better, and in some cases, much-better-than-expected, for the market to continue powering ahead," said Michael Sheldon, market strategist at RDM.

Sheldon noted that the strong results from Intel (INTC), JP Morgan and Google (GOOG) over the past week were met with moderate enthusiasm. Goldman Sachs Group, however, whose results, while above expectations, didn't beat by as much as in the previous quarter, saw its shares pummeled by the market.

"You can't blame investors, as Goldman's stock has tripled from its lows," Sheldon said. "In this environment, we need to get all the right things to keep investors excited."

Next week, another 75 S&P 500 companies are due to report earnings, including 11 Dow components.

"More investors' attention will be paid to the cyclical companies that have led the rally so far," Sheldon said. "Any disappointment could lead to significant profit taking."

Among the highlights next week will be results from Apple Inc. (AAPL) due after the close of trading on Monday.

Tuesday will bring, among others, Coca-Cola Co. (KO), Dupont (DD), Pfizer Inc. (PFE) and United Technologies Corp. (UTX).

Wednesday brings results from Boeing Co.(BA), Freeport McMoRan (FCX), Morgan Stanley (MS), and Wells Fargo (WFC).

On Thursday, results are expected from 3M Co. (MMM), AT&T Inc. (T), Credit Suisse Group (CS), Dow Chemical Co. (DOW), McDonald's (MCD), Merck (MRK), and Travelers Cos. (TRV).

On Friday, results from Microsoft Corp. (MSFT) are due.

Dow 10,000

After hitting the key 10,000 mark in the past week for the first time in over a year, the market is now looking for good reasons to push higher, according to Johnson of Johnson Illington Advisors.

"We're in a market that's reflecting deepening concerns about valuations. It's going to be a trendless market until we know what sales and earnings are really going to look like this earnings season and get some visibility for next year," he said.

While economic data is expected to take a backseat to earnings next week, some reports could still move the market. On Monday, the National Association of Home Builders is due to post its October housing market index.

Tuesday brings the September producer price index and September housing starts and building permits. On Wednesday will be the Federal Reserve's Beige Book of economic conditions. Thursday brings weekly jobless claims and September leading indicators.

On Friday, existing home sales data for September is expected.